Rule change to stoke London housing shortage

LONDON - Plans by the Greater London Authority (GLA) to force small property developers to build more affordable housing could exacerbate the capital's housing shortage, CB Richard Ellis (CBRE) said on Wednesday.

In a note, the property services firm said fewer homes could be built as a result of a rule change next February to ensure at least half of all residential developments with 10 or more homes -- rather than 15 and over, as at present -- was made up of social or temporary accommodation.

According to a 2004 study, London is faced with a 10-year shortfall of 353,500 homes due to booming migration into the city and increased household formation.

The GLA is targeting 30,500 additional homes per year by 2016, half of them affordable, to ease shortages which have helped to lift the average price of a London home to 377,807 pounds.

CBRE said the lower threshold had the potential to lift the construction of affordable homes in London by up to 16 percent if fully embraced by developers but in practice it risked pricing some developers out because the provision of affordable housing on a small site was often not viable, much less profitable.

A lower threshold on affordable housing would probably also lead to developers promoting sites of less than 10 units, CBRE said, citing data which showed that a quarter of all schemes granted planning permission in inner London between 1998 and 2006 were of 14 units.